EU Coal Enters Bull Market After Longest Rally Since 2008

  • European benchmark contract has rallied for eight days
  • Contract sank to lowest since at least 2007 in February

The worst may be over for European coal.

The contract for delivery to northwest Europe next year gained for an eighth day on Tuesday, the longest such streak since June 2008, according to broker data compiled by Bloomberg. While the fuel has climbed 25 percent since Feb. 17, the lowest since Bloomberg started compiling the data in September 2007, it’s still 79 percent below a 2008 high.  

Coal prices have slumped every year since 2010 in the face of stricter environmental regulations and increased competition from natural gas that worsened a global glut and sent miners including Peabody Energy Inc. into bankruptcy. The eight-day rally indicates that the worst may be over for the commodity, according to Nena AS, an Oslo-based adviser to utilities and energy traders.

“This is sustainable because we have in a way reached the bottom,” Diana Bacila, an analyst at Nena, said by telephone. “But the ceiling is that miners can come back to the market.”

Coal for delivery to Amsterdam, Rotterdam or Antwerp in 2017 rose as much as 1.6 percent to $45.30 a metric ton, the highest level since Nov. 26, before trading at $45.20 a ton, broker data show. Prices won’t rise to $60 “anytime soon,” Bacila said.

Crude Gain

A recent increase in the price of crude, which accounts for about 40 percent of coal mine costs, has been forcing miners to curb output or withhold the commodity from the market, according to the analyst. This is especially the case in Russia, Europe’s biggest foreign supplier, where the ruble has strengthened against the dollar, making production more expensive, she said.

While there will be some space for growth, this will be limited as few miners are willing to curb sales for long, Bacila said.

“No one wants to lose their market share,” she said.

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